ITM2

• Business


  The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society's needs
• Economics


  The study of how wealth is created and distributed
• Types of economy


  • Capitalism
  • Command
  • Mixed
• Types of competition


  • Perfect competition
  • Monopolistic competition
  • Oligopoly
  • Monopoly
• International business


  All business activities that involve exchanges across national boundaries
• Country's advantage


  • Different resources in different countries (e.g. labor supply, natural resources, custom levels)
  • Some countries are better equipped and have more advantages in conducting international business
• Absolute advantage


  The ability to produce a specific product more efficiently than any other nation
• Comparative advantage


  The ability to produce a specific product more efficiently than any other product
• Exporting


  Selling and shipping raw materials or products to other nations
• Importing


  Purchasing raw materials or products in other nations and bringing them into one's own country
• Balance of trade


  The total value of a nation's exports minus the total value of its imports over some period of time
• Trade deficit


  A negative (unfavorable) balance of trade where imports exceed exports in value
• Trade surplus


  A positive balance of trade where exports exceed imports in value
• Reasons for trade restrictions

  • To equalize a nation's balance of payments
  • To protect new weak industries
  • To protect national security
  • To protect the health of citizens
  • To retaliate for another nation's trade restrictions
  • To protect domestic markets/jobs
• Tariffs


  A tax that is levied on a particular foreign product entering a country
• Dumping


  The exportation of large quantities of a product at a lower price than that of the same product in the home market (to unfairly gain market share)
• Types of nontariff barriers

  • Import quota
  • Embargo
  • Foreign exchange control
  • Currency devaluation
  • Bureaucratic red tape
  • Cultural attitudes
• Trade restrictions have immediate and long term economic consequences – both within the restricting nation and in world trade patterns
• Reasons against trade restrictions

  • Higher prices result from the imposition of tariffs
  • Restriction of consumers' choices
  • Misallocation of international resources
  • Loss of jobs opportunities